powerpoint presentation · 2020-02-27 · pirelli esg leadership acknowledged by the market 1. e.g....
TRANSCRIPT
In General. This disclaimer applies to this document and any oral comments of any person presenting it. This document, taken together with any such oral comments, is
referred to herein as the “Presentation”. This document has been prepared by Pirelli & C. S.p.A. (“Pirelli” or the “Company” and, together with its subsidiaries the “Group”).
The Presentation is being furnished to you for information purposes only and for use in presentations of the results and strategies of the Group.
No distribution of this Presentation. This Presentation is being furnished to you solely for your information and may not be reproduced, in whole or in part, or redistributed
to any other individual or legal entity.
Forward-looking statement. “Forward-looking statements” (which expression shall include opinions, predictions or expectations about any future event) that may be
contained in the Presentation are based on a variety of estimates and assumptions by the Group, including, among others, estimates of future operating results, the value of
assets and market conditions. These estimates and assumptions are inherently uncertain and are subject to numerous business, industry, market, regulatory, geo-political,
competitive and financial risks that are outside of the Group’s control. There can be no assurance that the assumptions made in connection with the forward-looking
statements will prove accurate, and actual results may differ materially. The inclusion of the forward-looking statements herein should not be regarded as an indication that
the Group considers the forward-looking statements to be a reliable prediction of future events and the forward-looking statements should not be relied upon as such. Neither
the Group nor any of its representatives has made or makes any representation to any person regarding the forward-looking statements and none of them intends to update
or otherwise revise the forward-looking statements to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event
that any or all of the assumptions underlying the forward-looking statements are later shown to be in error.
No update. The information and opinions in this Presentation is provided to you as of the dates indicated and the Group does not undertake to update the information
contained in this Presentation and/or any opinions expressed relating thereto after its presentation, even in the event that the information becomes materially inaccurate,
except as otherwise required by applicable laws.
Verbal explanation. This Presentation has to be accompanied by a verbal explanation. A simple reading of this Presentation without the appropriate verbal explanation could
give rise to a partial or incorrect understanding.
No offer to purchase or sell securities. The information, statements and opinions contained in this Presentation are for information purposes only and do not constitute a
public offer under any applicable legislation or an offer to sell or solicitation of an offer to purchase or subscribe for securities or financial instruments or any advice or
recommendation with respect to such securities or other financial instruments. None of the securities referred to herein have been, or will be, registered under the U.S.
Securities Act of 1933, as amended, or the securities laws of any state or other jurisdiction of the United States or in Australia, Canada or Japan or any other jurisdiction
where such an offer or solicitation would be unlawful (the “Other Countries”), and there will be no public offer of any such securities in the United States. This Presentation
does not constitute or form a part of any offer or solicitation to purchase or subscribe for securities in the United States or the Other Countries.
DISCLAIMER (1/2)
Rounding. Due to rounding, numbers presented throughout this Presentation may not add up precisely to the totals provided and percentages may not precisely reflect the
absolute figures.
The data contained in this presentation are preliminary in nature and refer to the date hereof and, therefore, may be subject to further variations. Please note that
these preliminary data are subject to review by the independent auditors that still have to complete their necessary analysis in order to release their report. The
2019 final results will be approved by the Board of Directors scheduled on the 2nd of March 2020 and will be disclosed to the market according to, and in the
terms set for by, the applicable laws and regulations.
Neither the Company nor any member of the Group nor any of its or their respective representatives, directors, employees or agents accept any liability whatsoever in
connection with this Presentation or any of its contents or in relation to any loss arising from its use or from any reliance placed upon it.
Francesco Tanzi, the manager in charge of preparing the corporate accounting documents, declares that, pursuant to art. 154-bis, paragraph 2, of the Legislative Decree no.
58 of February 24, 1998, the accounting information contained herein correspond to document results, books and accounting records.
***
Non-IFRS and Other Performance Measures
This Presentation contains certain items as part of the financial disclosure which are not defined under IFRS. Accordingly, these items do not have standardized meanings
and may not be directly comparable to similarly-titled items adopted by other entities.
Pirelli management has identified a number of “Alternative Performance Indicators” (“APIs”). These APIs (i) are derived from historical results of Pirelli & C. S.p.A. and are not
intended to be indicative of future performance, (ii) are non-IFRS financial measures and, although derived from the Financial Statements, are unaudited and (iii) are not an
alternative to financial measures prepared in accordance with IFRS.
The APIs presented herein include EBIT, EBIT margin, EBITDA, EBITDA margin.
In addition, this Presentation includes certain measures that have been adjusted by us to present operating and financial performance net of any non-recurring events and
non-core events. The adjusted indicators are EBITDA adjusted, EBITDA margin adjusted, EBITDA adjusted without start-up costs, EBITDA margin adjusted without start-up
costs, EBIT adjusted, EBIT margin adjusted, EBIT adjusted without start-up costs, EBIT margin adjusted without start-up costs.
In order to facilitate the understanding of our financial position and financial performance, this Presentation contains other performance measures, such as CapEx (Capital
Expenditures) or Investments in property, plant & equipment, Operating working capital related to continuing operations, Net Financial (liquidity) / debt Position, Net financial
(liquidity)/debt position without IFRS 16, Operating net cash flow, Net cash flow and Net cash flow before dividends.
These measures are not indicative of our historical operating results, nor are they meant to be predictive of future results.
These measures are used by our management to monitor the underlying performance of our business and operations. Similarly entitled non-IFRS financial measures reported
by other companies may not be calculated in an identical manner, consequently our measures may not be consistent with similar measures used by other companies.
Therefore, investors should not place undue reliance on this data.
DISCLAIMER (2/2)
AGENDA
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION
PIRELLI STRATEGY DEPLOYMENT: PILLAR 1 – COST COMPETITIVENESS
2019 FINANCIAL REVIEW AND 2020-2022 TARGETS IN DETAIL
APPENDIX
PIRELLI STRATEGY DEPLOYMENT: PILLAR 2 - COMMERCIAL DEVELOPMENT
2020-2022 SCENARIO
PIRELLI STRATEGY DEPLOYMENT: PILLAR 3 – TECHNOLOGY-BASED INNOVATION
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION
1
EVOLUTION TO DATE
IMPLICATIONS FROM 2020-2022 SCENARIO
STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS
2020-2022 TARGETS AND ENABLERS
2025 VISION
1
2
3
4
5
PIRELLI HAS SUCCESSFULLY PURSUED A UNIQUE CONSUMER
POSITIONING AND BUSINESS MODEL FOCUSED ON HIGH VALUE
1. source German Product List (Pricat) @ Jan 2020; 2. Car Dealer, Tier 1
Wholesalers, Pirelli Retail, channels over which we exercise a greater control2
BUSINESS MODEL
1 2 3 4 5
Strong Relationship with
Most demanding OEMs
Cutting-edge
Technology
Iconic
Brand
Selective
Distribution
Low-Cost High-Tech
Production Footprint
Widest Marked
Homologated
Portfolio
Long-Term
Demand Visibility
Robust Pull-through
Demand
Low-Cost
High-Tech
Footprint
High Value
Go-to-Market
1,090 items1 in ≥18”,
~3x avg. Tier 1 Peers
Up to 10 Years
Replacement visibility
>80% Pull-through
Rate in 2019
80% Capacity in 2019
in Low-Cost Countries
>2/3 of Volumes
through H.V. Channels2
• Premium and Prestige Car drivers fitting ≥18”
• Focus on 3 H.V. Regions: Europe, USA and APac
HIGH VALUE (H.V.)
COMPETITIVE BARRIERS
• Standard presence reduction
• Trimming low profitability range
STANDARD (STD)
1. Implicit IPO
PIRELLI FORECASTS AND VOLUME PERFORMANCES
IN ≥18” PROVED CORRECT
3
2019 IPO1
PREMIUM & PRESTIGE (million cars)
≥18” CAR TYRE MARKET (million tyres)
≥18” CAR TYRE VOLUMES (million tyres)
Challenging pricing environment
on ≥18” non-specialties due to O.E. crisis
OEMs portfolio diversification
(new N. America and APac contracts in 2H 2019)
Price protection in ≥18” Specialties
(~50% of H.V. sales)
>
13 12
~ 255 ~ 255
~ 30 ~ 30
2019A
HIGH VALUE
CAR PROD.
~ 150 > 150CAR PARC
>
>
PIRELLI COUNTERMEASURES
UNFORESEEN EVENT
1. Evolution
to Date
1. Implicit IPO
…WHILE RAPID DECREASE ON ≤17" WAS NOT FULLY FORESEEN
4
Short-Term cost-cutting actions, leading to more
structural savings in 2020-22 plan
2018
Weaker Synergic car production caused unsaturation
and competitive pressure
-10 o/w -1 on
Specialties ≤17"
STANDARD
STANDARD CAR PRODUCTION (million cars)
≤17” CAR TYRE MARKET (million cars)
≤17" CAR TYRE VOLUMES (million tyres)
2019 IPO1 2019A
~ 86 ~ 77
-100 (o/w 62% O.E.)
~ 1,400 ~ 1,300
44 34
PIRELLI COUNTERMEASURES
UNFORESEEN EVENTS
>
>
>
>South America economic crisis resulting in severe
Standard Tyre demand contraction since 2H (-12% Repl.
Car ≤17” market in 2H2018; -5.8% in 1H2019)
EMEA and Russia more radical reduction with respect to
the IPO plan (second brands and lower rim-sizes pruning)>
>
Faster standard volume reduction than previously
planned, especially in EU, keeping a socially
responsible approach; footprint conversion (Italy)
Footprint rationalization (Brazil)
2019
1. Evolution
to Date
IPO1 VS ACTUAL
1. Implicit IPO
MORE GENERALLY, GAP IN STANDARD VOLUMES
EXPLAINING KEY VARIANCE WITH IPO PLAN
5
6.4
5.3ACT
IPO
1.16
0.92ACT
IPO
0.58
IPO
ACT
0.73
Revenues
Adjusted Ebit
€ billion
~ -0.08 net of
China JV invest.
-1.1
-0.15
2019
2017
-0.24
0.40
0.33
IPO
ACT
Net Cash Flowbefore dividends
-0.07
Cumulated
Net Cash Flowbefore dividends
Δ
Positive P/Mix gap vs. Raw Material, almost in line with IPO-0.04 bln
ForEx (-2 CAGR vs -1% IPO, USD devaluation)-0.1 bln
Price/mix (+6% CAGR vs +8% IPO, due to lower prices, driven by lower R. Mat growth
and O.E. price pressures)-0.3 bln
mainly Standard vol. cut (-9 million pcs) & lower Spec. ≤17” (-1 million pcs)-0.7 bln
mainly STD vol. cut & lower Spec. ≤17”-0.30 bln
Lower operating performance contribution-0.24 bln
Lower cumulated EBIT-0.30 bln
Short-term cost-cutting to limit volume decline impact+0.10 bln
Capex optimization to face weaker market demand+0.11 bln
Better Working Capital & lower Taxes+0.06 bln
Capex optimization +0.15 bln
0 bln China JV Investment (€65 million) compensated by D Work. Cap. & lower Taxes
2019
1. Evolution
to Date
TOP-OF-THE-INDUSTRY ESG RATINGS PIRELLI DISTINCTIVE FACTORS
PIRELLI ESG LEADERSHIP ACKNOWLEDGED BY THE MARKET
1. e.g. ISO 20400, ISO 26000, AA1000, ISO 37001, etc.6
Global Compact
LEAD company 2019
Sector top rating
Global Sector Leader in the S&P
Dow Jones Sustainability Indexes
Awarded sector Gold Class 2020
in S&P Sustainability Yearbook
Comprehensive corporate positioning on key global
sustainability challenges, beyond materiality
A-List in Carbon
Disclosure Project 2019
>
>
>
>
Management model complying with most demanding
ESG standards1
ESG targets are:
― Group wide
― Tangible
― Challenging and realistic
― Competitive deadlines
Complete and transparent Reporting
1. Evolution
to Date
EVOLUTION TO DATE SUM UP
7
KEEP PRUNING LOW RIM STANDARD
PURSUE HIGH VALUE APPROACH…
…WITH A HIGHER O.E. / HOMOLOGATION SELECTIVITY
ACCELERATE STRUCTURAL COST COMPETITIVENESS PROGRAM
LOWER CAPEX INTENSITY IN NEW PLAN AS H.V. CAPACITY ALREADY IN PLACE
LEVERAGE ON SUSTAINABLE APPROACH TO GAIN COMPETITIVE ADVANTAGE BY ANTICIPATING FUTURE CHALLENGES
1. Evolution
to Date
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION
8
EVOLUTION TO DATE
IMPLICATIONS FROM 2020-2022 SCENARIO
STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS
2020-2022 TARGETS AND ENABLERS
2025 VISION
1
2
3
4
5
1. Category includes Car Sharing, Ride-Hailing, Rental Fleets, Private and Company
Leasing Cars; 2. EVs include BEV (Battery Electric Vehciles) and PHEV (Plug-in Electric
Vehicles)
NO MAJOR DISCONTINUITY IN «HIGH-END» MOBILITY
IN THE NEXT 36 MONTHS
9
2015 2018
10.7
2020 2022
9.6
11.5
12.2
+4%
+4%
+3%
2018
89%
9%7%
93%
10.711%
91%
2015
11.5
2020
Shared &
Services1
15%
85%
2022
Private
Ownership
9.6
12.2Car Global Miles Driven (billion) by ownership model
202220202015 2018
272340
399465+8%
+8%+8%
1%
5%
11%
20%
2015 2018 2020 2022
% EV on Global Parc n.a. 1% 2% 5%
Car Global Miles Driven (billion)
Global # of Households with > $75k annual Income % EV2 Penetration on Global Premium production
MILES DRIVEN GROWING CONSTANTLY PRIVATE CAR STILL DOMINANT
«HIGH-END» CONSUMERS GROWING ELECTRIC CARS GROWING SHARE (PREMIUM)
2. Implications from
2020-2022 scenario
Source: Company elaborations based on third party and associations of tyre
producers car market data; minor restatements on past data may occur
RESILIENT GROWTH OF HIGH VALUE TYRE DEMAND
10
256
94%
2021E
242
93%
2019A2018A
93% 94%
2020E
94%
2022E
Other regions
EU, N. America, APac
272~305
+6% +6%
2022E
94%
2018A 2019A
94% 94%
12
2020E 2021E
94%94%
Other regions
EU, N. America, APac
1212 ~13
-2% +2%
2019A 2020E
87%
2018A
87%
~180
87%87%
2021E
87%
2022E
Other regions
EU, N. America, APac
148 156 164
+5% +5%
9.4%
9.3%
CAGR
16A-19A
~6%
~6%
CAGR
19A-22E
5.7%
5.8%
CAGR
16A-19A
~5%
~5%
CAGR
19A-22E
1.2%
1.3%
CAGR
16A-19A
~2%
~2%
CAGR
19A-22E
(million vehicles)
PRESTIGE &
PREMIUM CAR PARC
(million vehicles)
PRESTIGE & PREMIUM
CAR PRODUCTION
≥18” O.E. + REPLACEMENT
TYRE MARKET(million tyres)
2. Implications from
2020-2022 scenario
Source: Company elaborations based on third party and associations of tyre producers
for car market data; Company elaborations and estimates based on public
announcements and third party data for Car Capacity data; for 2019-2022 period
assuming all new capacity installed is ≥18” and deployment according to latest available
public announcements (possible slowdowns in capacity deployment not included in
figures)
HIGH VALUE OVERCAPACITY IN 2019 WILL PERSIST,
UNLESS PLAYERS POSTPONE PROGRAMS
11
256
Demand
2019
Capacity
2019
~325
~75
~250
<80% sat.
Capacity
2022
~300
Demand
2022
~100~305
~400
<80% sat.
≥18” demand vs. Tier 1 + Tier 2 estimated Capacity
Demand CAGR ’19-’22: ~+6%
Capacity CAGR ’19-’22: ~+7%
• Of which Tier 1 +6.5%
• Of which Tier 2 +10%
Tier 1
Tier 2
Tier 1
Tier 2242
Capacity
2018
Demand
2018
~50
~215
~265
~90% sat.
Tier 1
Tier 2
SEVERAL RESTRUCTURING PROGRAMS ALREADY ANNOUNCED AND MORE LIKELY TO COME, BUT FOCUSED ON STANDARD
≥18" NOMINAL CAPACITY VS. MARKET DEMAND (2018-2019-2022) - ESTIMATES
2. Implications from
2020-2022 scenario
TECHNOLOGY & BRAND CAN LIMIT PRICE PRESSURE
IN HIGH VALUE
12
Source: Pirelli Survey on CRM contacts (2019)
NOISE CANCELLING SEAL INSIDE
~+20%
~+10%~+15%
Specialty Non-Specialty
RUNFLAT
TECHNOLOGY FOR EVs ANOTHER KEY COMPETITIVE BARRIER
Product choice factor analysis 2019, Premium target (EU) % replies
“important” and “very important” (scale 1-5)€ Sell-out price for tyre, same Product Line, Specialty vs. non-Specialty
TECHNOLOGIES (E.G. RUNFLAT, PNCS,
SEAL INSIDE) WITH HIGHER ADDED VALUE
PREMIUM CONSUMERS MAINLY LOOK
FOR PRODUCT PERFORMANCE, BRAND AND SAFETY
80%
35%
Performance
Brand
Safety
Design
Price
2. Implications from
2020-2022 scenario
Source: Company elaborations based on third party and associations of tyre
producers car market data; minor restatements on past data may occur
17" THE ONLY SEGMENT GROWING IN STANDARD
13
~78
88%EU, N. America, APac 89%
2018A
89%
2021E2019A
89%
2020E
88%
2022E
Other regions
82 77 75
-6% -2%
76%
2018A 2022E
76% 76% 76%
2019A 2021E2020E
76%
Other regions
1.305
EU, N. America, APac
1.235 1.269 ~1,370
+3% +3%
~3%
~2.5%
CAGR
19A-22E
3.4%
3.5%
CAGR
16A-19E
~0.5%
<0.5%
CAGR
19A-22E
-2.0%
-2.6%
CAGR
16A-19E
80%81%
2019A2018A
79%
2020E
=17”
2021E 2022E
79% 79%
~1,300
≤16”
1,352 1,315 1,295
-3% -2%
(million vehicles)
SYNERGIC CAR
PARC
(million vehicles)
SYNERGIC CAR
PRODUCTION
≤17” O.E. + REPLACEMENT
TYRE MARKET(million tyres)
-0.3%
>1%
CAGR
19A-22E
-0.8%
-0.6%
3.4%
CAGR
16A-19E
-1.5%
2. Implications from
2020-2022 scenario
Source: Company elaborations based on third party and associations of tyre
producers car market data; minor restatements on past data may occur
MARKET DEMAND CONTINUOUSLY REPOSITIONING TOWARDS
HIGH END SEGMENTS
14
86%
11%10%
236
11%
82%
5%9%
2016A
7%
83%
2019A
7%
82%
2020E
8%
2022E
≥18”
17”
≤16”
246255
247
17”
1,299
64%
17%
14%
18%
69%
2016A
18%
18%
2022E
≥18”
≤16”
1,326 1,320 1,354
18%
2019A
62%
21%
2020E
61%
19%
STANDARD REGIONS
(ALL OTHER REGIONS)
(million tyres)
(million tyres)
H.V. REGIONS
(EU, NA, APAC)
6.6%
0.2%
1.3%
9.8%
>3%
~0.5%
>1%
>5%
CAGR
16A-19A
CAGR
19A-22E
3.1%
-1.9%
0.7%
9.3%
>1%
<-1%
>0.5%
>6%
CAGR
16A-19A
CAGR
19A-22E
2. Implications from
2020-2022 scenario
15
Pursue High value approach…
…With a higher O.E. / homologation selectivity
Keep pruning low-rim Standard
Accelerate structural Cost
Competitiveness Program
H.V. capacity already in place:
low CapEx-intensity in New Plan
RESILIENT HIGH VALUE DEMAND
OVERCAPACITY/PRICE PRESSURE
INNOVATION AND BRAND LEADERS
CAN LIMIT COMPETITIVE PRESSURE
STANDARD 17” IS A GROWING MARKET WITH
DOUBLE-DIGIT REPLACEMENT PROFITABILITYLeverage on Sustainable approach to gain
competitive advantage
EVOLUTION TO DATE 2020-2022 SCENARIO IMPLICATIONS
>
>
>
>
2. Implications from
2020-2022 scenario
1. Evolution
to Date
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION
16
EVOLUTION TO DATE
IMPLICATIONS FROM 2020-2022 SCENARIO
STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS
2020-2022 TARGETS AND ENABLERS
2025 VISION
1
2
3
4
5
STRATEGIC GUIDELINES 2020-2022
17
REPOSITION IN STANDARD, WITH LOW-COST SOURCES IN LATAM & RUSSIA
HIGH VALUE IS PIRELLI’S “TRUE NORTH”
─ Sustainability-driven innovation
─ Brand
─ Structural cost competitiveness
─ Speedy capture of opportunities through data-rich insights
RAISE COMPETITIVE BARRIERS FASTER:
3. Strategic guidelines &
key 2020-2022 programs
BUSINESS MODEL STRENGTHENED THROUGH 3 KEY MAJOR
PROGRAMS, BACKED BY A MORE CONTAINED INVESTMENT
18
HIGHER FREE CASH FLOW GENERATION
Contained Investment Program
COST
COMPETITIVENESSCOMMERCIAL
DEVELOPMENT
TECHNOLOGY-BASED
INNOVATION
3. Strategic guidelines &
key 2020-2022 programs
1. Net of inflation
01. COST COMPETITIVENESS: 2 WAVES, REACHING
~510M€ EFFICIENCY IMPROVEMENT GROSS OF INFLATION
19
Gross impact Gross impact
Total ’20-’22
Manufacturing
Product Cost
Organization
SG&A
~ €180 mln
~ 2.5 %
~ €330 mln
~ 4.0 %
~ 4.0 % ~ 7.5 %
~ €110 mln ~ €180 mln
~ €510 mlnTotal Gross Impact
as % of 2019 cost baseline ~ 6.5 %
~ 11.5 %as % of 2019 cost baseline
~ €290 mlnTotal Net Impact1
WAVE 2 – 2021-2022
~ 28%
~ 28%
~ 12%
~ 18%
~ 36%
~ 33%
Weight on
Wave 1
Weight on
Wave 2
WAVE 1 - 2020
3. Strategic guidelines &
key 2020-2022 programs
~ 22%
~ 22%
02. COMMERCIAL DEVELOPMENT
20
2019 A
2022 E
~64M
~69M
≤17” ≥18”
~+9Min ≥18"
~-4Min ≤17"
Time-to-Market
reduction
78% Specialties and
≥19" Non-Specialty
Slight erosion on
O.E.; high-teens
lifecycle profitability
Flattish,
Slight erosion
17” Growth through
Product Renewal
Replacement Push-Through
O.E.: selective growths
(Integrated Lifecycle Profitability)
Replacement Pull-Through >Product &
Manufacturing
Cost Reduction
VOLUME VARIANCE (CAR) KEY PROGRAMS PRICE POLICY COST IMPROVEMENTS
≤16” Pruning low-rim sizes
& second brands
Major Cost reduction:
Footprint (Bollate)
Low Cost Plants
(Kirov, Campinas)
Efficiency
>
>
>
>
3. Strategic guidelines &
key 2020-2022 programs
APPROACH
NEW
TECHNOLOGIES
DEVELOPMENT &
ENGINEERING
PRODUCT
03. TECHNOLOGY-BASED INNOVATION:
ACCELERATING PRODUCT INNOVATION
21
Fast-pace product renewal
• H.V. homologated product families renewed, with Specialties available
in most of the new Product Lines
• 15 push-through lines, regionalized
• Reduced time-to-market
• Modularity & Commonality Virtualization in Design & Testing
• ELECT EV “Marked” portfolio
• Entering the second stage of Cyber Innovation
New Development & Engineering approach, derived from F1 & Motorsport data driven experience
Working in parallel on Medium-term opportunities
~+40% New Product Lines
in ’20-’22 vs. ’17-’19
-30% development time
>1/3 2020-2022
homologations
projects on EVs
Product roadmap led by an eco & safe design approach from cradle to grave
• Significant increase in the use of renewable and recycled materials, and decrease of fossils
• Max technological trade-off between low environmental impact and safety performances
• Consumer portfolio accompanying the transition towards smart and micro-mobility
• Supply chain co-operating in the development of high added value solutions, resilient in ESG risk management
3. Strategic guidelines &
key 2020-2022 programs
HIGH TECH AND ECO-EFFICIENT MANUFACTURING FOOTPRINT
22
Full High Value Capacity H.V. / Std. Capacity
PIRELLI MANUFACTURING FOOTPRINT:
HIGH-TECH & ECO-EFFICIENT
> 9 Car Fully High Value, of which 6 new / robotized
> Bollate Plant converted to Premium Velo
2 Production Hubs in Low Cost Countries serving
closer High Value markets: LatAm for N. America and
Russia for Europe
>
IN 2022 18 PLANTS (~82% LOW COST COUNTRY)
> 100% renewable electricity worldwide by 2025
> Group Carbon Neutrality by 2030
> Commitment to the Science Based Target initiative,
in alignment with our CO2 emissions reduced strategy
> Excellence in water management
> Zero waste to landfill
AN INDUSTRIAL ENVIRONMENTAL
FOOTPRINT SUBSTANTIALLY REDUCING
Velo
Moto
3. Strategic guidelines &
key 2020-2022 programs
ALREADY REACHED OPTIMAL CAPACITY IN HIGH VALUE,
LEADING TO A CONTAINED INVESTMENT PLAN
23
2020-2022 INVESTMENT PROJECTS HIGHLIGHTS
• Focus on Specialties and mix/quality improvement
• Ongoing Restructuring Plan (Italy & Brazil) 2017-2019A
2020-2022A
H.V. Capacity
(increase + conversion)
Tech upgrade &
productivity
improv.
Maintenance
& others Total
€1.3 bln
€0.9 bln
Capacity ≥18” Capacity ≤17”
22
(29%)
38
(54%)
33
(46%)
2016 A
27
(35%)
612
50
(65%)
2019 A
3 5
53
(71%)
2022 E
7177 75
• 10 increase
• 2 conversion
HIGH VALUE CAPACITY CONSISTENT WITH DEMAND
• H.V. Capacity already increased strongly in 2017-2019
(Europe, China and Mexico)
• 2020-2022 further H.V. Capacity mainly from Conversion
STANDARD CAPACITY REDUCTION: -11m pcs in 6 years
mainly in EMEA & LatAm. Saturation ~90% in 2022 (70% in
2019)
CAR CAPACITY
CAPEX PLAN
million pcs
3. Strategic guidelines &
key 2020-2022 programs
ALWAYS IN TOP 3 POSITIONS
IN KEY MARKETS
MOVING EFFORTS DOWN
THE CONSUMER JOURNEY
1. Considering several parameters: Top-of-Mind Brand, Brand Awareness, Brand
Consideration and Brand Conversion (Top Choice)
REINFORCING OUR ICONIC BRAND FOR PREMIUM CONSUMERS
24
35%41%
22%
27%
42%32%
2019 A
Conversion
2022 E
Awareness
Consideration
2019 Pirelli Brand Tracking Premium Consumers1 Pirelli Global Brand Investments in Consumer
Journey funnel, 2019 and 2022
Sponsorships
Focus
on US
1
2 3
BRAND INITIATIVES RELEVANT
FOR PREMIUM CONSUMERS
1
2 3
1
2 3
1
2 3
3. Strategic guidelines &
key 2020-2022 programs
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION
25
EVOLUTION TO DATE
IMPLICATIONS FROM 2020-2022 SCENARIO
STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS
2020-2022 TARGETS AND ENABLERS
2025 VISION
1
2
3
4
5
€ billion
2020-2022 TARGETS
1. Assuming average 40% dividend pay-out on consolidated net income in the 2020-
22 Industrial Plan26
CapEx
Net Cash Flow bef. Dividends
Net Sales
cum. ’20-’22
~0.9
2022 E
~2.5
cum. ’20-’22
~1.5
~5.8
2019 A
0.39
3.5
0.33
5.3
~0.3
2020 E
~3.3
~0.4
~5.4
o/w
~0.5 in ’21
~0.6 in ’22
adj. EBIT 0.9 ~ flat YoY
18% ÷ 19%margin 17.2%
vs. cum
‘17-’19 ~1.3
Net Financial Position (IFRS 16)1
4. 2020-2022 Targets
and Enablers
1. Eco-Safety Performance products, previously named “green performance
products”, identify car tyres that Pirelli produces throughout the world and that fall
only under rolling resistance and wet grip classes A, B, C according to the labeling
parameters set by European legislation
PIRELLI REMUNERATION SYSTEM ALLIGNED WITH
INDUSTRIAL PLAN
27
COMPENSATION MIX FOR KEY MANAGEMENT
• No more than 50% of Total Annual Direct Compensation on reaching all objectives at
target level
FIXED COMPONENT
• Cash incentive based on key Financial objectives (Group Adj. Ebit, Net Income, Net Cash
Flow before dividends) and Sustainability (Eco-Safety Performance1 Revenues)
• On/off condition: Group Net Cash Flow before dividends
• 25% deferred to the next year
SHORT-TERM INCENTIVE (1/3 of total variable compensation)
• Cash plan based on 3 key objectives: Relative TSR vs. Tier1 peers; 2020-22 Cumulated
Group Net Cash Flow before dividends; on-going inclusion in Sustainability Indices
(Dow Jones Sustainability World Index ATX Auto Component sector, CDP scoring)
• Rolling plan: every year starting a new 3-year period
• Payment in 2023 and at the end of each 3-year vesting period
LONG-TERM INCENTIVE PLAN 2020-22 (2/3 of total variable compensation)
ALL VARIABLE COMPONENTS ARE CAPPED
NON-COMPETITIVE AGREEMENT
CLAW-BACK CLAUSES KEY MANAGEMENT
IN BOTH MBO AND LTI PLANS
REMUNERATION STRUCTURE to be approved by the Shareholders’ Meeting (June 18, 2020)
4. 2020-2022 Targets
and Enablers
GOVERNANCE CONFIRMED BY RENEWED
SHAREHOLDERS’ AGREEMENT
28
Pirelli Technological
know-how never be
transferred unless
approved by 90% of
Pirelli shareholders
Pirelli By-Laws shall be
inspired by
international best
practices
Focus on Diversity value:
gender, age, seniority, nationality,
educational background and
work-experience
Board made of highly qualified
Members with a suitable mix of
skills.
Independent directors shall be
the majority of the Board
The partnership acknowledges: (i) Pirelli is a company
specialised in high quality and technology products, (ii)
loyalty, professional skills and expertise of the
management, key factor for the Company success and
business growth
Leading role of Marco Tronchetti Provera in the
designation of his successor
Pirelli headquarters
shall remain in Milan
(Italy) unless approved
by 90% of Pirelli
shareholdersTransactions with related
parties to be governed by best
International practices with a
key role of the Committee for
Related Parties Transactions
Pivotal role of the top management to maintain quality
standards, to preserve and value Pirelli industrial
legacy
One-fifth of the Board
shall be appointed by
minority shareholders
Pirelli Chief Executive Officer to lead top management
and ensure Pirelli business culture continuity
Pirelli Recruiting, Career Plans and incentive schemes
to match management and shareholders interests.
Incentive plan targets consistent with Pirelli Strategic
Plan, and in line with the best practices for listed
Companies (e.g.: TSR, sustainability)
BY-LAWS BOARD OF DIRECTORS SHAREHOLDERS AGREEMENT
Internal committees in line with
the best practices, with
independent directors having a
key role.
4. 2020-2022 Targets
and Enablers
PIRELLI EVOLUTION TO DATE & STRATEGIC DIRECTION
29
EVOLUTION TO DATE
IMPLICATIONS FROM 2020-2022 SCENARIO
STRATEGIC GUIDELINES & KEY 2020-2022 PROGRAMS
2020-2022 TARGETS AND ENABLERS
2025 VISION
1
2
3
4
5
10.711%
2015
7%
93%
9%
89%91%
2018 2020
15%
85%
2022
>20%
<80%
2025
Shared &
Services1
Private
Ownership
9.6
11.512.2
13.3
1%5%
11%
20%
~30%
20182015 2020 2022 2025202020182015 2022 2025
272340
399465
577+8%
+8%+8%
+7%
1. Category includes Car Sharing, Ride-Hailing, Rental Fleets, Private and Company
Leasing Cars; 2. EVs include BEV (Battery Electric Vehciles) and PHEV (Plug-in
Electric Vehicles)
KEY DYNAMICS IN 2025
30
10.7
202520182015
13.3
2020 2022
9.6
11.512.2
+4%+4%
+3%+3%
Car Global Miles Driven (billion)
n.a.% EV on Global Parc 1% 2% 5% 9%
MILES DRIVEN KEEP GROWING CONSTANTLY
Car Global Miles Driven (billion) by ownership model
SHARED & SERVICES GETTING RELEVANT
Global # of Households with > $75k annual Income
«HIGH-END» CONSUMERS KEEP GROWING
% EV2 Penetration on Global Premium & Prestige production
ELECTRIC CARS RELEVANT
ALSO IN REPLACEMENT
5. 2025 Vision
Note: “Connected” refers to cars with mobile data connection (e.g. 2G, 3G, LTE),
which might be provided by either embedded car systems or car hardware paired with
external devices (e.g. smartphone), “Electric” refers to BEV / PHEV
Source: company analysis on consulting and investment banks research reports
CAR TRENDS ‘2020-’2025: SOLUTIONS FOR ELECTRIC & CONNECTED
31
PRODUCTION PARC
~11%2020E
~30%2025E
~2%
~9%
ELECTRIC
Prestige & Premium
CONNECTED
Prestige & Premium
• First phase of technology Development and testing
in F2/Motorsport completed
• Entered an industrialization phase, with Premium
O.E. Partners and an open ecosystem of Partners
in Semiconductors, Manufacturers and Tyre makers
~71%2020E
~all2025E
~30%
~52%
• O.E. Partnership with top-end OEMs and start-up
innovators over 1/3 of O.E. Homologations
pipeline
• ELECT: Distinctive Marking Strategy to ensure BEV
tyre Replacement with tyre designed for BEVs
PIRELLI SOLUTIONSMARKET PENETRATION (%) IN PRESTIGE & PREMIUM
5. 2025 Vision
CORONAVIRUS DISEASE (COVID-19) – PREVENTION AND READINESS
32
• Travels to and from China are blocked and all travels to APAC are
discouraged.
• APAC expatriates were returned to their homeland together with their
families.
• All personnel coming back from China cannot return to workplace
before 15 days after the day of arrival.
• A 24/7 hotline with specialized medical support is available.
• Continuous monitoring of the disease evolution in direct connection with
national and international Organizations.
• Availability of prevention and emergency kits (e.g. masks, hand
sanitizer dispensers, increased cleaning frequency of workplaces).
• Sanitizing and disease prevention training for all employees.
GROUP MEASURES FOCUS CHINA
• Body temperature checks applied to all people entering Pirelli facilities.
• In addition, employees are checked twice during their shift.
• All employees must wear approved masks (provided by Pirelli).
• All incoming trucks are disinfected before entering the factories.
• The workplaces are disinfected every 3 hours.
• First aid rescue team linked with authorized hospitals has been established.
• All employees receive regular pay.
• Smart-working is encouraged.
• 5 Million RMB donated to Coronavirus Relief Efforts
through the Yanzhou Charity Federation of Jining city,
Shandong Province.
• 90,000 N95 masks, 350,000 general medical masks,
500 thermometers, and 86,000 gloves sent directly to
China from Italy, Germany, Mexico, Argentina.
SUPPORT TO CHINA PREVENTION CONSTANT MONITORING
ALL OTHER COUNTRIES
• Adopt all Group measures.
• Availability of prevention and emergency kits.
• Continuous monitoring of specific Country’s disease evolution.
5. 2025 Vision
CORONAVIRUS DISEASE (COVID-19)
– PRELIMINARY SENSITIVITY ANALYSIS
33
PIRELLI IN CHINA
2019 Total Capacity: ~14 million car pcs, 1.4 million Moto pcs
% of Export: ~25% mainly within Apac
CHINA CONTRIBUTION:
• Temporary closure of 2 plants;
Yanzhou is running at low capacity utilization
• Shanghai office (APAC HQ) closed. Region managed by Tokyo and
Singapore offices.
• No delays in export and flows guaranteed today. Alternative flows
identified and available. No problems world wide for Chinese
components and Raw Material with alternative sources already
activated.
• In 1Q lower business seasonality (New Chinese Year);
• Current February Sales Volume -80% vs normal business activity; March
projection in recovery to -30% vs normal business activity.
• Impact of ~ -€30 million on 1Q adj. EBIT, expected to be offset during
the year (easing raw mat and pricing pressure with lower overseas
supply)
• Should the emergency be extended to 2Q, an update will be provided with
1Q results in May, on both impacts and additional countermeasures
Full High Value Capacity High Value/ Standard Capacity
CURRENT SITUATION
ESTIMATED IMPACT
Shenzhou Car (JV) –Shandong province
Jiaozuo Car –Henan province
Yanzhou Car / Moto –Shandong province
• ~12% Group Sales
• High teens weight on Group Adj EBIT
5. 2025 Vision